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Editor's
NOTE |
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Here at The Rodale Institute® we’ve been focusing in recent years
on weed management for organic growers. In particular,
we’ve been trying to perfect no-till organic
techniques and technologies. So, when we uncover
evidence that shows just how bankrupt pesticide-ready
GM technologies are—even from an economic
point of view—we like to share those findings.
When Paul Hepperly, The Rodale Institute’s
research manager, emailed us a link to this article,
we said “Man, we’ve got to reprint
this, even if it’s from two years ago. It
deserves a second life!”
So, here’s the story of how an Iowa State
professor entered the industry lion’s den
and documented the failure of GM seed technologies:
In December 2001 at the American Seed Trade Association
Meeting in Chicago, Michael Duffy, a Professor
of Agriculture Economics at Iowa State University,
addressed a crowd squarely supporting new biotechnologies
and their commercialization as seed varieties.
Dr. Duffy entertained this hostile crowd with
a very concise message--that biotechnology has
simply not worked for Midwest corn and soybean
farmers.
In his address, which we reprint in full here,
Duffy documented how the real Iowa yields of Round-up
Ready® and non-genetically modified soybeans
were nearly equivalent. The variable that promised
to spell disaster for Iowa farmers was the high
seed costs associated with GM crops. By using
this new technology, Duffy found, Iowa farmers
lost an additional $8.85 per acre compared to
non-GMO soybeans.
The same was true, Duffy found, for BT corn—equivalent
yields to non-GMO corn, but added costs resulting
in an additional loss of $3.25 per bushel compared
to non-GMO corn.
Real results from real farmers showed conclusively
that Iowa corn and soybean farmers do not benefit
from these new technological innovations. You
might just be able to guess who does.
As Professor Duffy states so elegantly, “concentration
of market power leads to failure in markets and
the ability of these markets to allocate resources
efficiently.“ The experiment has been a
big failure both economically and environmentally.
Maybe it’s time to step in and show the
world a better way.
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December 3, 2003: Good morning. I appreciate
the opportunity to be with you today. My talk is going to
focus on an extremely important topic. Yet, too often, it
also is a topic that segregates people into competing groups
that rely only on rhetoric and scare tactics rather than discussing
the real issues.
We all have our biases and regardless of what anyone says,
our biases influence our perspectives. As scientists we strive
to eliminate our biases from our research but the very fact
that we look at one issue and not another reveals our biases.
What we should strive for is to control our biases and acknowledge
them from the beginning.
I am the Associate Director for Iowa State University's Leopold
Center for Sustainable Agriculture. I also am the Professor-in-Charge
of the ISU Beginning Farmer Center. Finally, I am an ISU Extension
Economist.
All this means that I view the world both from an economic
perspective and from the perspective of working with agriculture
and farmers. I am an educator who tries to present information
in as factual a way as possible and give people the tools
and means to form their own opinions. I start from the basic
supposition that economics is the study of allocating scarce
resources and not simply the study of money. I also feel that
humans are a part of the natural system and not apart from
it. The impacts of our worldly actions are governed by a set
of ecological principles; some of which we understand and
others that we do not fully comprehend.
As an economist, I believe in the market as an efficient
mechanism for allocating resources. However, just as I believe
in the efficiency of the market, I also know there are market
failures. These failures take several forms. Difficulty in
valuing externalities is one example. Public goods, such as
air and water, are other areas where the market cannot efficiently
cope with all the issues. Allocating resources between generations
is another problematic area for the market. Finally, I think
that concentration of market power is something that will
lead to the failure of markets as an efficient mechanism for
allocating resources.
In this talk I will first briefly discuss biotechnology.
Next, I will share the results of a study examining the farmer
impact of herbicide tolerant soybeans and Bt corn. Finally,
I will draw some conclusions and discuss the implications
of what I have found.
Biotechnology
Biotechnology has been labeled "a misleading expression
because it conveys a singularity or unity to what is actually
a tremendously diverse set of activities and range of choices."
(Buttel, 1985) A U.S. Department of Agriculture (USDA) publication
notes, "… biotech processes and products are so
diverse and have so little in common with one another that
it is difficult to construct valid generalizations about them.
Broader than genetic engineering and gene splicing, biotech
includes tissue, cell, and embryo culture; protoplast fusion;
bioregulation or hormonal control of physiological and metabolic
processes; production of gene-controlled products; directed
plant breeding; and fermentation processing." (USDA,
1987)
Throughout this paper I am simply going to use the term biotechnology,
recognizing that there are inherent problems with using this
single term. However, I do not want to further muddle an already
confusing issue with what, for most of us, are technicalities.
Michael Fox provides a chronological presentation of the
significant biotechnology events leading up to the present
day. Fox begins with the breeding experiments by Mendel in
1869. (Fox, 1992) Others feel that the roots of biotechnology,
especially as it relates to traditional plant breeding, can
be traced back to the earliest days of agriculture and the
domestication of plants and animals. Keeney, however, points
out, "In contrast, the new agricultural biotechnologies
provide the tools for molecular and cellular approaches to
altering plants and animals." (Keeney, 1998)
This is a big distinction between more traditional plant
and animal breeding and biotechnology. The traditional methods
were limited to using only materials that were biologically
similar. With today's biotechnology capabilities, scientists
are able to construct animals and plants that would never
have been possible using conventional breeding techniques.
Before considering who benefits from biotechnology, it is
necessary to discuss one idea that I feel is erroneous. Many
proponents of biotechnology say that this technology is necessary
to feed the world. They argue that if we do not use biotechnology,
many of the world's people will face starvation and other
ills associated with malnutrition. This is certainly a concern;
however, the evidence shows that it is not the hungry who
are being fed but rather the affluent, i.e., those who can
afford to buy the food. The earlier Green Revolution also
was promoted as a means of eliminating world hunger. Food
production has increased but we still have hungry people.
The problem is not one of production but rather a problem
of distribution and politics. Ho Zhiqian, a Chinese nutrition
expert, was quoted as saying, "Can the Earth feed all
its people? That, I'm afraid, is strictly a political question."
(Reid, 1998) As we think about biotechnology, we must not
confuse wanting the world to be fed with wanting to feed the
world.
Before discussing a specific example of who benefits from
biotechnology it is important to examine what agricultural
examples of biotechnology have been approved. As of May 1999,
there were 15 products approved for unregulated release, 13
crop, and 2 non-crop. (USDA, 2001) There were 53 different
examples within the 13 crop groups. Only three of the products
contained what were described as "value-enhanced traits".
The rest contained "agronomic traits," primarily
herbicide tolerance or insect resistance.
These are the so-called first generation biotech or genetically
engineered products. A second generation now being developed
or tested will greatly expand the number of available crops
and applications of this technology.
Herbicide-tolerant soybeans
The case of herbicide-tolerant soybeans will be used to
examine the benefits of biotechnology at the farm level. The
data for this analysis come from a random sample, cross-sectional
survey of Iowa soybean fields. The survey was conducted by
the Iowa office of the USDA's National Agricultural Statistics
Service in the fall of 2000. The data presented are for the
2000 crop year.
The survey covered all aspects of crop production. This included
yields, pesticide and fertilizer use, seeding rates and the
type and nature of machinery operations performed.
Several assumptions were necessary to compare the costs and
returns for herbicide- tolerant versus non-tolerant soybeans.
The price per bushel was $5.40. This price represented the
average loan rate and emergency payments. The per unit cost
for pesticides was obtained from various sources at Iowa State
University. The per unit costs of fertilizer and seeds were
the costs used in the Iowa State Extension Service cost of
production estimates (Duffy and Smith, 2001). Finally, the
costs for the various machinery operations represented the
average custom rate charge as reported by the Iowa State University
Extension Service (Edwards and Smith, 2001a).
The final data set contained observations for 172 fields.
Of these fields, 63 percent (108 fields) reported using herbicide-tolerant
soybeans. There were 64 fields that reported planting soybeans
that were not herbicide tolerant.
Figure 1 (below) shows the average yields. The herbicide-tolerant
soybeans averaged 43.4 bushels per acre while the non-tolerant
soybeans averaged 45.0 bushels per acre. The percentage difference
in yields is identical to the difference found in a similar
study for the 1998 crop year (Duffy, 1999). In 1998, the yields
were 49.2 and 51.2 bushels per acre for herbicide- tolerant
and non-tolerant soybeans, respectively.
The major cost differences attributed to planting herbicide-tolerant
or non-tolerant soybeans are for seed and herbicide costs.
Figure 2 (below) shows the seed expenses for herbicide- tolerant
and non-tolerant soybeans. The seed expenses were found by
multiplying the price for seed times the seeding rate. (The
seeding rate was the rate reported by the farmer.) The price
for the non-tolerant seed was the price reported by Iowa State
Extension (Duffy and Smith, 2001). There was a 5 percent premium
added to this price to represent the price for the herbicide-tolerant
seed. Five percent was a conservative estimate to reflect
any price differences plus the tech fee charged.
The seed cost for herbicide-tolerant soybeans averaged $5.69
per acre more than the non-tolerant fields. In 1998, the difference
was $7.53 per acre. The expense for non-tolerant soybeans
was lower in 1998 while the expense for the tolerant varieties
was slightly higher.
The cost for herbicides is shown in Figure 3 (below). The
farmers reported the rate of each chemical they applied. The
non-tolerant soybeans averaged $26.15 per acre for herbicides,
which was $6.17 higher than the herbicide costs for the tolerant
fields. This cost difference is similar to what was found
in 1998 even though the herbicide costs, in general, are higher
in 2000 when compared to 1998.
The herbicide-tolerant soybean fields had an average of 1.55
sprayer trips in 2000, compared to 2.45 trips for the non-tolerant
fields. Sprayer trips ranged from 1 to 4 for the tolerant
fields while 6 was the maximum number of sprayer trips reported
for the non-tolerant fields.
Cultivation is another technique used to manage weeds. In
2000, 48 percent of the tolerant fields reported at least
one cultivation. This compares to 63 percent of the non-tolerant
fields that reported at least one cultivation. The number
of cultivations ranged from 0 to 2 but the average number
of cultivations reported for the tolerant fields was .59 versus
an average of .85 cultivations for the non-tolerant fields.
Figure 4 (below) presents the total weed management costs
for both the tolerant and non-tolerant soybeans. This figure
includes herbicide material and application costs as well
as the cost for cultivations. The total weed management cost
for tolerant fields was $27.14 versus $34.80 per acre for
the non-tolerant fields. Again, these costs and the differences
were very similar to the 1998 totals.
When all of the costs, including those mentioned, plus fertilizer,
lime, all machinery operations, insurance, and a land charge
are considered, there is essentially no difference in costs
between the tolerant and non-tolerant fields.
The land charge used was calculated in three steps. First,
the average statewide yield for soybeans was divided by the
average rent per acre. (Edwards and Smith, 2001b) The result
was $2.85 per bushel. This amount was multiplied by the average
yield in the survey and the result was $125.08 per acre. This
was the land charge used for all fields.
Figure 5 (below) shows the return to labor and management
for the tolerant and the non-tolerant fields. In 2000 both
seed types lost money. The return to the herbicide-tolerant
fields was an $8.87 per acre loss while the non-tolerant varieties
essentially broke even with a calculated $.02 per acre loss.
Two major considerations could not be included in this analysis.
First, the price per bushel for either the type of soybeans
was assumed to be the same. Recently there have been some
considerations for price differentials based on whether or
not the soybeans were herbicide tolerant. The second major
consideration omitted from this analysis was the difference
in time for combining. Farmers report that they are able to
combine tolerant fields faster because there is less clogging
of the combine. Many also report producing cleaner beans.
These considerations are beyond the scope of this analysis.
These considerations notwithstanding, based on this analysis
it appears that there is essentially no difference in the
return to using herbicide-tolerant versus non-tolerant soybeans.
This is the same conclusion that was reached in the similar
1998 study.
Use of herbicide-tolerant varieties results in lower herbicide
and weed management costs. However, they also have higher
seed costs and slightly lower yields.
If the returns to the herbicide tolerant and non-tolerant
varieties are similar, why have the tolerant crops been adopted
so readily? The acreage planted to herbicide-tolerant varieties
has gone from nothing a few years ago to more than half the
acres planted or higher depending on the estimate. There are
several reasons for this phenomenon. First, the ease of harvest
is an overriding consideration for many producers. Being able
to harvest easier and faster makes farmers more willing to
adopt a new technology even if it does not produce clearly
superior returns.
Farmers also may be using the herbicide-tolerant varieties
on fields with particularly heavy weed problems. If the average
returns are comparable. then it is simpler to use the same
varieties so that commingled soybeans are not an issue.
Advertising and landlord pressure could also be part of the
explanation for the phenomenal rise in the use of herbicide-tolerant
soybeans. Some landlords insist on clean fields and the herbicide-tolerant
varieties offer that option.
There are other reasons that have been mentioned such as
greater flexibility, less time in the field at harvest, and
so forth. Many of these become individually compelling reasons.
But, given the analyses in 1998 and again in 2000, there does
not appear to be any difference in the per acre profitability
between the two varieties.
Bt Corn
The second example used to evaluate who benefits from biotechnology
is Bt corn. The data used for this study come from the same
data set used for the soybean example just reported. For corn,
there were 128 non-Bt fields and 46 Bt fields.
The costs and returns were calculated in the same way as
for the soybeans. The price used for corn was $2.06 per bushel.
This price reflects the $1.76 loan rate of regular government
payments plus emergency payments.
The average yield for Bt corn was 152 bushels per acre (Figure
6). The average yield for the non-BT corn was 149 bushels
per acre. This yield difference is less than the difference
found in the 1998 study.
The planting rate was reported by the farmers, while the cost
for seed was reported by Iowa State Extension with a 15 percent
premium added for Bt seeds. This reflects the cost differences
plus the tech fee. Figure 7 shows the seed cost comparisons.
The Bt cornfields had slightly higher total fertilizer costs
per acre (Figure 8). The Bt fertilizer cost was $53.30 versus
$48.67 for the non-Bt fields, much similar to the results
found in 1998. Although no production reason exists for the
higher fertilizer costs, it is hypothesized that the Bt fields
are managed more intensively which leads to the increased
fertilizer costs.
Total, non-land, costs for Bt corn averaged $207.25 per acre
as opposed to the non-Bt corn that averaged $197.00 per acre.
This difference is lower than the cost difference found in
1998. At that time the Bt corn was $20 per acre more costly
than the non-Bt varieties.
The land charge used here was calculated similarly to the
land charge for the soybeans. The average rental rate used
was $130 per acre. This is higher than the Iowa average rate
of $120 reported by the Iowa State Extension (Edwards and
Smith, 2001b).
Both Bt and non-Bt corn showed a negative return to labor
and management. The Bt corn lost an average of $28.28 per
acre while the non-Bt corn posted an average loss of $25.02
(Figure 9).
Similar to herbicide-tolerant soybeans, Bt corn produced
a return essentially equal to the non-Bt corn. Even though
Bt corn has not increased in acreage as the herbicide-tolerant
soybeans have, this again raises the question of why people
would adopt an equal technology at all, especially given the
potential marketing problems associated with Bt corn.
Many farmers plant Bt corn as a sort of insurance policy.
Pest populations are unknown at the beginning of the season.
There are certain fields and conditions where a pest outbreak
is more likely. For these fields, the use of Bt corn could
produce dramatically different results than those presented
here. Remember that this is a cross-sectional study and not
a side-by-side comparison.
Some farmers claim the Bt corn has more brittle stalks and
that it is not as appealing to cattle as a feed. In spite
of these observations, the yields for Bt corn found here are
higher than the non-Bt and this was similar to the cross-sectional
study in 1998.
Who Benefits from Biotechnology?
The preceding analysis shows that the primary beneficiaries
of the first generation biotechnology products are most likely
the seed companies that created the products. Additionally,
in the case of herbicide tolerance the companies that supply
the tolerant herbicides also are the benefactors from the
development of the biotech crops.
It also appears that farmers have benefited from biotechnology.
Their gains, however, appear to more related to greater ease
of production and the ability to cover more acres as opposed
to an increase in the profits per acre. The farmer benefits
are evidenced by the rapid adoption of this new technology.
As noted, in Iowa soybean acres planted to herbicide-tolerant
varieties went from zero to more than half the total acreage
in just a few years. Farmers definitely perceive a benefit
even if their profits are not increasing.
It has been argued that consumers also are the beneficiaries
of the first generation biotech products because the increased
production leads to lower prices. Whether or not production
increases depends upon the crop under consideration. For soybeans,
the yields actually are slightly less, while for corn they
are slightly higher.
Regardless of the crop under consideration, it is hard to
determine whether consumers actually benefit from the first
generation biotech products. The prices for the basic commodities
covered are already low due to abundant supplies. In addition,
government programs that support prices will cost the taxpayers
more if the prices continue to drop.
Consumers actually spend only a fraction of their food dollar
on these basic commodities. Changes in the price of the basic
commodities will have little impact on the prices charged
to the consumers. Additionally, a consumer backlash against
biotech indicates that, for at least some consumers, the addition
of biotech crops is not seen as a benefit but an added risk.
Today's biotech crops and applications are merely the first
generation of products. It appears from these examples that
the primary beneficiaries are the seed and chemical companies
and, to a lesser extent, the farmers. What will happen with
the proposed second-generation products remains to be seen.
Conclusion
The results presented here are from a cross-sectional study.
Replicated, randomized plot studies by Pecinovsky also reached
the same conclusions. (Iowa State University, 2001) Similar
to this study, he found the Bt corn had higher yields whereas
the herbicide tolerant soybeans had lower yields.
Today the primary benefactors of biotechnology are the seed
companies and chemical companies. Farmers appear to be receiving
some non-pecuniary benefits. And, in spite of arguments to
the contrary, there is only mixed evidence with respect to
consumer benefits.
The primary reason for the first generation biotech applications
was to focus on input traits. Given this approach it is not
surprising that the input companies are the primary beneficiaries.
Biotech applications that focus on output traits, as opposed
to the input traits, may produce more widely dispersed benefits.
One of the issues that I have not addressed but that is
a concern to many people pertains to the externalities associated
with the use of biotechnology, especially as it has been applied
to date. There is a question of unknown health effects from
the genetically modified products. Health officials have assured
the public that this should not a concern, but this is not
an entirely satisfactory reassurance to many.
Several other externality issues surround the use of biotech
crops. Insect and weed resistance will develop faster with
the widespread use of these products. There also is the issue
of pollen drift that affects people trying to grow either
organic commodities or some other type of crop requiring segregation
from biotech varieties.
Biotechnology is an extremely powerful tool. It has the
potential to create many useful products as well as many unforeseen
problems. As with any new technology, it must be evaluated
carefully. It is not prudent to expect private companies to
develop products for the public good. Companies are in the
business of making money and the products they pursue are
designed for that end. To expect any other result from private
research is not appropriate or realistic. 
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